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The effects of stock index futures trading on stock index volatility: An analysis of the asymmetric response of volatility to news

The effects of stock index futures trading on stock index volatility: An analysis of the... Antonios Antoniou is a Professor in the Department of Economics and Finance, Brunel University. Phil Holmes is a Senior Lecturer in the Department of Economics, University of Durham. Richard Priestley is an Associate Professor in the Department of Business Economics, Norwegian School of Management. The Journal of Futures Markets, Vol. 18, No. 2, 151–166 (1998) 1998 by John Wiley & Sons, Inc. CCC 0270-7314/98/020151-16 Antoniou et al. wards (1988a, 1988b), Robinson (1994), and Antoniou and Holmes (1995)]. Traditionally, increased volatility, following the onset of futures trading, has been viewed as an undesirable consequence of destabilizing forces (for example, speculators). This view gained impetus following the stock market crash, which some commentators blamed on futures trading, in general, and program trading, in particular. The impact of destabilizing forces could lead to an increase in uncertainty in the spot market, which, in turn, could raise the required rate of return of investors in the market. If this is correct the cost of equity capital will be increased, perhaps unduly, leading to a misallocation of resources in the economy. On the other hand, some commentators argue that futures markets provide a means by which the mechanism for the transmission of news http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Futures Markets Wiley

The effects of stock index futures trading on stock index volatility: An analysis of the asymmetric response of volatility to news

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References (27)

Publisher
Wiley
Copyright
Copyright © 1998 John Wiley & Sons, Inc.
ISSN
0270-7314
eISSN
1096-9934
DOI
10.1002/(SICI)1096-9934(199804)18:2<151::AID-FUT2>3.0.CO;2-1
Publisher site
See Article on Publisher Site

Abstract

Antonios Antoniou is a Professor in the Department of Economics and Finance, Brunel University. Phil Holmes is a Senior Lecturer in the Department of Economics, University of Durham. Richard Priestley is an Associate Professor in the Department of Business Economics, Norwegian School of Management. The Journal of Futures Markets, Vol. 18, No. 2, 151–166 (1998) 1998 by John Wiley & Sons, Inc. CCC 0270-7314/98/020151-16 Antoniou et al. wards (1988a, 1988b), Robinson (1994), and Antoniou and Holmes (1995)]. Traditionally, increased volatility, following the onset of futures trading, has been viewed as an undesirable consequence of destabilizing forces (for example, speculators). This view gained impetus following the stock market crash, which some commentators blamed on futures trading, in general, and program trading, in particular. The impact of destabilizing forces could lead to an increase in uncertainty in the spot market, which, in turn, could raise the required rate of return of investors in the market. If this is correct the cost of equity capital will be increased, perhaps unduly, leading to a misallocation of resources in the economy. On the other hand, some commentators argue that futures markets provide a means by which the mechanism for the transmission of news

Journal

The Journal of Futures Markets – Wiley

Published: Apr 1, 1998

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